Thoughts from Dave Mead and discussion about issues and concerns for Small and Mid-size Businesses. Some discussion topics will include strategic planning and execution, improving profitability and cash flow, maximizing value for exit.

Monday, June 22, 2009

One of the most counter-intuitive facts about recessions is that there are more layoffs and more bankruptcies AFTER the recovery has begun than during the recession itself. This has been true with past “v-shaped” and U-shaped recoveries, What will happen in a very FLAT (_____)-shaped recovery?

In a recent Wall Street Journal survey of economists, while most economists found that the recovery will begin sometime in late 2009, there was an alarming statistic about the duration of the recovery: “The depth of the downturn means it will take years to eat up the slack created by the recession. Nearly half of the economists said it will take three to four years to close the output gap, while more than a quarter say it will take five to six years.”

“We're going through a transition in the economy back to a more normal share of consumer spending relative to GDP," said Paul Kasriel of The Northern Trust Corp. "This is a very deep and defining recession that is going to lead to a transformed U.S. economy, and these transformations don't take place overnight."

Could this be true? 3-4 more years? 5-6 more years? Will it be that long before we return to economic vitality? If these economists are right (and yes, I admit that’s a dubious prospect), we are in for a very long, slow process of rebuilding. Companies hoping for a rapid rebound will be in for a shock. Some companies will not have adequate cash positions to survive the next 5 years. Some companies will seize the opportunities to grow dramatically while others are continuing to retrench.

Which will your company be?

Your company needs to plan carefully, have everyone’s objectives and metrics well-aligned, execute well, and be prepared to take advantage of opportunities and uncertainty.

Here are some random facts about surviving the recovery:1. Companies that maintain or increase marketing during recessions reap a 3.2:1 sales advantage.2. On average, only 10% of customers in any category buy exclusively on price.3. Minority recapitalizations can be a great way to bolster the balance sheet to take advantage of “recovery opportunities.”4. Customers actually buy more of less discretionary items in the downturn.5. Customers increase spending in education, reading, personal insurance, health care, and food at home during recessionary periods.6. Know your customers. 7. Don't market with a tone of fear. Market your core values. 8. Drop your weaker distributors.9. Focus on reliability, performance, and trust, in your marketing message.10. There's a key distinction between price cuts and discounts that shouldn't be ignored.11. Acquire good brands if you're in a good cash position.12. Maintain frequency of marketing, decrease duration. 13. Shift your resources to your key profitable customer pools. 14. Anticipate competitor moves. 15. Be decisive when given the opportunity to build, buy, sell, or partner.16. Email marketing to be used as an acquisition tool in downturn economies, not just a retention tool. 17. Continue to carefully monitor accounts receivables for all customers.

Thursday, June 18, 2009

Recently, we held a meeting with the CEOs and/or owners of two dozen of our clients across a variety of industries. As you might expect, some are experiencing very tough times, some are doing remarkably well, and most are holding their own. To a person, every one of them has a clear understanding of the tactics for the balance of 2009.A number of them have downsized, management and employees have taken pay cuts and/or reduced work schedules, product lines have been streamlined,

As we discussed the measures and actions taken, it became clear to me that we collectively have learned or reaffirmed some basic management lessons during the past year that we would all do well to remember once the economic fortunes turn brighter. We had a lot of fun spending a couple of hours discussing lessons learned. Some of these will be presented in more comprehensive fashion in the next few Issues for Growth.

Quite a few lessons were very simple statements or values. While some of these may sound a little “Ben Frankin-esque,” I thought I would share a few of these on sound bite form.

Some Lessons Learned from the 2008-2009 Recession

· Not every sale is a good (or profitable) sale· Focus on cash flow· Pay more attention to the balance sheet· Sometimes you can make more money at lower revenue levels· It’s amazing to see which employees really step up when given the chance· We don’t need everything we thought we needed· Don’t wait. Deal with the non-performers· The importance of good relationships – with customers, suppliers, employees, friends· Necessity is the mother of invention· Focus on the fundamentals· Be prepared to sell when the economy is rolling; Don’t miss the next upturn· Dangers of the herd mentality· Humility is a good thing· Focus on your core business· Importance of good advisors· You discover who the real performers are· Sometimes less is more· Importance of contingency planning· Lean is good; Eliminate waste· Simplify business processes· Fewer meetings; more focused meetings; “stand-up” meetings· End entitlement thinking· Tighten the supply chain· Execution is the key

Welcome to Mead's Issues for Growth

Since 1991, we have been publishing a periodic eLetter "Issues for Growth" that contains articles or thoughts of interest to business owners looking to grow and improve their businesses. We invite your comments and discussion.

About Me

We have been consulting with small and mid-size businesses for over 30 years, helping companies move to the "next level of success" by focusing on strategies that the company can execute well and aligning all activities within the company to those key strategies.
I have started and run 7 companies - a couple of great successes, a few moderate successes, a couple of screaming failures.